Pushing The Envelope At The Post Office

Postmaster General Anthony M. Frank looked grim as he stepped before the cameras mn Nov. 5. The Postal Service Board of Governors had just killed his proposal to raise the first-class mail rate by 1~, to 30~, which would have increased annual revenues by $800 million. Frank had won six of nine votes, but changing the rate required unanimous approval. "I don't want to be overly dramatic about it," said a frustrated Frank. "But you can go to the electric chair on a 5-4 vote."

Such are the travails of trying to run the $48 billion Postal Service as a real business. When the former savings and loan executive became the nation's chief postman in March, 1988, he hoped to inject a dose of rational management into the sprawling, nearly unmanageable service. But despite making more progress than most of his predecessors, Frank, who is 60, has been sinking into the bureaucratic and political swamp of late. To make matters worse, the Bush Administration forced Frank to pick up a bigger portion of the service's retirement benefit tab. Meanwhile, growth in mail volume slowed, thanks to the combined effects of a 19% rate hike last February, the recession, and competition from express mail, private delivery, and fax machines. So a projected $900 million surplus for the year ended Sept. 30, 1991, is now a $1.6 billion deficit. And with rivals stealing more of its business, the service has to run faster and faster to stay in place.

PENNY WAR. Frank has had some success, particularly in enforcing the sort of tough cost control that eluded earlier postmasters. He also tamed labor, an area where his immediate predecessor, R. Preston Tisch, fell down. Resorting to binding arbitration this year, Frank beat back the service's major unions and won a four-year agreement that capped labor costs -- which make up 83% of expenses -- and gave management flexibility to hire temporary and part-time workers as it automates. Since 1989, Frank has trimmed 37,000 workers from the Post Office's 700,000-person payroll.

And on Oct. 7, Frank announced plans to cut an additional 47,000 workers by 1995, saving $4.5 billion a year by then. "He's been one of the best," says Richard A. Barton, senior vice-president for government policy at the Direct Marketing Assn., which represents bulk mailers. Unlike many of his predecessors -- who sometimes moved in and out of the job in a matter of months -- Frank has gotten his hands dirty working for real change, winning kudos for being neither a political hack nor a postal-lifer.

But the postmaster may have reached an impasse, largely because the 1970 Postal Reorganization Act, which was supposed to put the Post Office on a more businesslike footing, fell far short of its goal. The law is loaded with protections designed to keep the service from abusing its monopoly position. However, the law also made it difficult to respond to competitive threats from newer forms of telecommunications. Postal Service executives have neither the freedom nor the accountability of private-sector managers. "I'm the only CEO of a major corporation in America who doesn't have control over his own prices," Frank notes. Rate changes must be approved first by the President-appointed Postal Rate Commission, then by the Board of Governors.

'WHIPPING BOY.' This unwieldy structure has forced Frank to spend a good portion of 1991 fighting over a penny. In January, the Postal Rate Commission cut his proposed 30~ stamp back to 29~. An annoyed Frank went on the stump, describing the decision as "dumb" and deriding the PRC for "only helping the copper miners of Chile." Such open scorn alienated the panel and, despite a later apology, helped kill Frank's efforts to get the extra money now.

Frank understands that the job of running the easy-to-criticize Post Office makes him fair game for legislators -- and anyone else -- looking to make headlines. "The public has to have a whipping boy, and the Post Office is a pretty good target," says Representative William L. Clay (D-Mo.), chairman of the House Post Office & Civil Service Committee.

Even efforts to bear the lash with good humor can backfire. On Aug. 2, Frank did a stint on Late Night with David Letterman, overseeing the show's regular "viewer mail" feature and playing the silent straight man as Letterman poked fun at the service. But the appearance didn't sit well with some postal unions, already angry about cutbacks at the agency. "He stood there just like a potted plant," snipes Morris Biller, president of the American Postal Workers Union. Not long after Frank's appearance, Biller distributed "Wanted" posters bearing Frank's picture and the legend: "The most dangerous threat to USPS in history." Frank calls such personal attacks "unproductive."

Frank gets mixed reviews from politicians who oversee his agency, too. "He's a bit brittle" when it comes to criticism, says Senator David H. Pryor (D-Ark.), chairman of the subcommittee on federal services, Post Office, and civil service. "He doesn't do well with the give-and-take of politics."

OLYMPIC EFFORT. More important, Frank's innovations haven't always been a hit. He drew fire with a plan designed to stretch out mail deliveries in some parts of the country to ensure more consistent performance. The American Bankers Assn., for example, complained that the slowdown would cost banks $135 million annually in lost interest, because checks would take longer to clear. Frank, in response, says that market research had shown that customers wanted more reliable delivery even if it occasionally was slower. The agency is implementing the plan but has modified it in some areas to minimize the impact on banks.

Frank also has been slapped by Capitol Hill for his plan to spend $122 million to be a sponsor of the 1992 Olympic Games. He claims sponsorship will be a morale booster for workers and adds that the effort will make a $50 million profit, primarily through the sale of souvenirs and other Olympics-related postal items. But some critics expect the effort to lose money and worry that it will distract some in the Postal Service from their primary mission, delivering the mail. They also point out that a monopoly doesn't need such promotion.

Many CEOs have learned to expect public criticism over executive compensation, but here, too, Frank has special problems. Congress complained loudly when it learned that the Post Office handed out $20 million in bonuses to its managers during a three-year period in which the service lost $1.4 billion. The Chicago unit, for example, lost $142 million during that time -- and got poor performance ratings -- but 62 of its executives received a total of $503,298 in bonuses. Frank, who earns $99,500, says that his managers are underpaid and have less control than private-sector managers over financial results. Agrees Norma Pace, the Postal Board of Governors' chairman: "Congress will always find something to be critical about."

Frank has tried hard to improve service. He restored the window hours that had been cut back by Tisch. He hired Price Waterhouse and Opinion Research Corp. to monitor delivery standards and customer satisfaction. In the past, internal studies were often rigged to make postal management appear far more effective than it was. Better external measurements are making postal workers more competitive with one another and therefore more responsive to customer needs, Frank claims.

Meanwhile, he is trying out new ways of serving customers. For example, the agency is testing the sale of stamps from automated teller machines at banks. It's also trying to keep the maximum wait for window service to five minutes, an ambitious goal, experts say. But not all programs work smoothly. Last year, Frank started selling mugs, T-shirts, and other items bearing the postal emblem or stamps at post offices. Frank says it brought in $15 million in revenue and netted $3 million. Lawmakers immediately blasted the plan, saying that postal workers shouldn't be tied up selling knickknacks. Frank will use outside vendors to sell postal merchandise in the future. "It just shows the high risks of doing anything new around here," he says.

FRIENDLY WARNING. Frank probably won't be around to see all his efforts pay off. When he signed on, he said he wouldn't stay beyond March, 1992. And there are signs he's getting ready to pack his bags. He was up for the top job at the Resolution Trust Corp., but he withdrew. Now, he is thinking of accepting a private-sector post in California.

Before he goes, he offers a word of advice to any corporate hotshot who thinks that the Postal Service is just another messed-up company that can be brought to heel. "I was told when I started that this was the most frustrating job in Washington," Frank says. "I haven't been disappointed."


-- Trimming the service's 700,000-strong work force by 12% by 1995

-- Speeding mail processing with automated equipment

-- Capped worker pay increases in 1991 and won flexibility on work rules

and hiring of temps

-- Hired outsiders to gauge delivery standards and customer service


-- Needs legislation to gain more control over rates

-- Must replace a bureaucratic culture with a maleable one

-- Must recapture market share from express-mail rivals

-- Must rebuild flagging mail volume -- especially third-class junk mail


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